Louisville Mayor Wants State Pension Funds in VC
Firms

May 5, 2003 (PLANSPONSOR.com) - Louisville,
Kentucky's mayor is talking about putting money down on a
horse race of a different kind: state pension fund
investments in Louisville venture capital firms.

Mayor Jerry Abramson’s plan calls for the pension
dollars to be invested through two
Louisville venture capital firms, Chrysalis Ventures
LLC and Prosperitas Investment Partners LP.
If approved, the proposal could generate between
$480 million and $720 million, which would be used to help
companies start and grow, according to a report by
bizjournals.com.

Abramson said he plans to ask for 2% to 3% of the $24
billion controlled by two retirement systems.
The two systems to receive the pitch are the Kentucky
Retired Teachers’ System and Kentucky Retirement Systems,
which each control about $12 billion, according to the
policy director for the Kentucky State Treasurer’s
Office.

The mayor said that after studying state law, a
conclusion was reached that pension boards can invest in
venture capital funds.
“We believe that the statute on the books gives
flexibility to the (retirement funds) to set aside a
percentage of the money for venture-capital investment,”
Abramson said.
Detail of the venture capital idea, along with other
entrepreneurship initiatives, will be presented in a speech
at the monthly meeting of The Venture Club of Louisville on
Wednesday, May 7.

Officials Talked

Abramson said the idea was discussed with Kentucky
State Treasurer Jonathan Miller.
Miller said he supports the idea, and he agrees that
state retirement-fund boards have the authority to invest
money in venture capital.
“They make a very compelling case, particularly during a
time when the stock market is so shaky.”

Miller serves on the board of directors of the
Kentucky Retired Teachers’ System, which, as part of its
duties, oversees the management of the pension fund.
As part of the pitch, the mayor’s team explained
that the risk of investing in businesses through venture
capital firms historically compares favorably with most
stock indexes. Additionally, the funds were presented as
having even lower risk because the amount of investment
sought is a small percentage of the funds’ holdings and
because the venture capital firms spread among several
businesses rather than directing one investment to one
recipient.

Miller said the first step will be for Abramson
administration officials to approach the boards
individually. If the boards reject the idea, the next step
would be to seek support in the Kentucky General Assembly
for legislation requiring the boards to make such
investments.